Outsourcer Fires CEO Over Relationship

BANGALORE, India—Outsourcing company iGate Corp. said its board fired President and Chief Executive Phaneesh Murthy for allegedly failing to report a relationship with a subordinate employee.

U.S.-based iGate, which is listed on the Nasdaq Stock MarketNDAQ0.08% and employs 28,000 people, mainly in India, said in a written statement that Mr. Murthy had violated company policy and his employment contract by not informing senior management of the relationship. It didn't elaborate on the nature of the relationship or where it might have occurred.

ENLARGE

Ex-iGate CEO Phaneesh Murthy
Reuters

The company, of Fremont, Calif., said it had received in the U.S. a complaint of sexual harassment against Mr. Murthy but an investigation by an outside legal counsel hadn't uncovered any evidence of this. It didn't say who made the claim of harassment.

Mr. Murthy, during a conference call with reporters on Tuesday, denied he had violated company policy. He said the complaint had been made by a woman who is a senior iGate employee, with whom he said he had a "personal" relationship. He called claims of sexual harassment "false and fabricated."

Mr. Murthy, who was based in Fremont, said the relationship ended several weeks ago. He said he told the company of the relationship after it ended, which led to the investigation. Mr. Murthy said he hadn't decided whether to contest his dismissal, of which he said he hadn't been informed until after office hours on Monday in the U.S.

"Mr. Murthy's departure was not related in any way to the company's operational or financial performance, both of which remain strong," said Ashok Trivedi, co-founder of iGate and co-chairman of its board.

The statement said Gerhard Watzinger, a former senior executive with Intel Corp.'sINTC0.14% McAfee business unit, is the company's interim CEO and president, effective immediately.

Mr. Watzinger, 52 years old, worked at iGate previously.

The board is currently searching for a permanent CEO and president to take over from Mr. Watzinger, the statement said.

Mr. Murthy, who was born in India and is 49, joined iGate about a decade ago. Before that, he worked for Infosys Ltd.INFY-0.24%, one of India's largest outsourcing companies. He joined Infosys in 1992 as a marketing manager and rose through the ranks to become its senior vice president and global head of sales in 1998.

In May 2000, Mr. Murthy joined the Infosys board. In 2001, a former Infosys employee filed a lawsuit against him and the company in a California court alleging sexual harassment by Mr. Murthy and wrongful termination.

Mr. Murthy denied wrongdoing. He resigned from Infosys in 2002, citing the need for personal time to pursue a successful defense of the lawsuit.

Infosys and its insurers paid $3 million to settle this case out of court with the former employee in May 2003. In a filing to the U.S. Securities and Exchange Commission, Infosys denied the woman's allegations of sexual harassment and wrongful dismissal.

In 2003, another former employee of Infosys filed a lawsuit against Mr. Murthy and the company claiming that he allegedly sexually harassed her while she was employed there.

A statement posted on Infosys's website says the suit was settled out of court in 2004 through an $800,000 payment, of which Mr. Murthy and Infosys's insurers paid half each.

Mr. Murthy denied wrongdoing and said he chose to participate in a settlement to ensure the issue didn't distract him from his job at iGate, a subsidiary of which he had joined in 2003.

In a written statement in November 2004, he said: "This has been a very difficult decision for me, a clash of my personal beliefs and the responsibilities of running a large public company, and the implications of a CEO taking weeks or months off to fight a lawsuit."

Infosys denied wrongdoing. A spokeswoman for Infosys declined to comment further on Tuesday regarding either case.

On Tuesday, Mr. Murthy said that since the previous cases "anybody feels that this is an easy way to collect money on whatever pretext."

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